spainfiscalspainfiscal

Spain’s 3% Levy: the Treaty Exemption Was Repealed in 2013

Setting it straightPublished:

It is still quoted in English-language property forums, in expat guides and in the odd law-firm page: a non-resident company covered by a treaty with an exchange-of-information clause does not pay the 3% levy on its Spanish villa. That sentence was true. It stopped being true on 1 January 2013, and the article that replaced it has three exemptions, none of which mentions a treaty.

The short version

The exemption from Spain’s 3% special levy for entities entitled to a double tax convention with an exchange-of-information clause was repealed with effect from 1 January 2013 by the fifth final provision, paragraph 3, of Ley 16/2012.

Valery Grinkevich

Written by

Valery Grinkevich

Licensed economist · tax adviser · 20+ years of experience · Torrevieja, Costa Blanca

One article, two texts

Article 42 of the consolidated Non-Resident Income Tax Act — Real Decreto Legislativo 5/2004 — governs the exemptions from the special levy on property held by non-resident entities, and in the BOE consolidated database it exists in two versions. The original, in force from 13 March 2004, listed five cases. Its letter b) exempted entities entitled to a convention for the avoidance of double taxation containing an exchange-of-information clause, provided the individuals ultimately owning the entity were resident in Spain or covered by such a convention themselves — proved by a declaration of the Spanish properties and the ultimate individual holders, with foreign residence certificates, filed in the same period as the levy.

The version in force since 1 January 2013 is four lines. The levy is not payable by a) foreign States, foreign public institutions and international organisations; b) entities carrying on in Spain, continuously or habitually, economic activities distinguishable from the mere holding or letting of the property, on the terms set by regulation; and c) companies listed on officially recognised secondary markets. There is no letter d), no letter e) and no second paragraph. The treaty route was not narrowed or made harder to prove. It is gone.

What the fifth final provision of Ley 16/2012 actually deleted

The reform is the fifth final provision, paragraph 3, of Ley 16/2012 of 27 December, with effects from 1 January 2013, and it removed more than the treaty case. Former letter e) went with it: non-profit charitable or cultural entities recognised under the law of a treaty State, where the property served their objects. So did paragraph 2, which reduced the levy proportionally when the residence conditions of the members, participants or beneficiaries were met only in part. Five exemptions and a partial relief became three exemptions and nothing else.

The same provision reworked the chapter on the same date: paragraph 1 rewrote article 40, paragraph 2 article 41, and paragraphs 4 and 5 retitled article 45 as accrual, declaration and affection, adding a paragraph 3 under which property transferred by an entity subject to the levy stays affected to its payment. The consolidation is current — the act metadata reports a last update of 23 June 2026 — so article 42 has not been touched since.

What it costs the owner who believed it

The levy is 3% of the cadastral value, or of the value determined under the Wealth Tax rules where there is no cadastral value (articles 41.1 and 43). It accrues on 31 December each year and is declared and paid the following January (article 45.1). Nothing needs to have happened for it to arise: no rent, no gain, no sale. Holding the property, or holding by any title a real right of use or enjoyment over it, on 31 December is the whole taxable event — so every 31 December since 2013 has produced its own liability, with its own deadline and its own clock.

Two rules make it worse than an ordinary unpaid tax. Missing the January window opens enforced collection against the property itself, the certificate that the voluntary period expired unpaid being sufficient title to start (article 45.2). And since 2013 a property transferred by an entity subject to the levy remains affected to its payment (article 45.3) — which is why this surfaces at the notary, in a sale, twenty years after the structure was set up. One point of order: article 45.1 says only that the levy is declared in the place and form established, so the AEAT form number you will see quoted is administrative practice, not statute.

The exemption that is left, and why letting does not qualify

What remains usable for a private structure is letter b): economic activities carried on in Spain, continuously or habitually, distinguishable from the mere holding or letting of the property, on the terms set by regulation. Three expressions carry the weight. Continuously or habitually rules out an isolated operation dressed up for the occasion. Distinguishable requires the activity to be separable from the property itself. And on the terms set by regulation puts the content of the test outside article 42, which makes it a documentary question before it is an argument.

The trap is the word letting. The article does not exclude the dormant company and admit the one that rents the villa out; it excludes the mere holding or letting of the property, which is to say the two things a holiday-home structure normally does. Summer lets are the excluded activity, named in the statute. The other two exemptions are not built for family structures: letter a) is for States, foreign public institutions and international organisations, letter c) for listed companies.

The question that replaced it: article 40 was narrowed the same day

The original article 40 subjected every non-resident entity owning or holding Spanish real estate to the levy. The version in force since 1 January 2013, rewritten by paragraph 1 of the same final provision, subjects only entities resident in a country or territory that has the consideration of a tax haven — the statute still uses that older wording. The exemption disappeared, but so did most of the exposure it relieved: an ordinary company resident outside such a territory falls outside article 40 altogether and needs no exemption. Readers who learn only of the repeal usually panic in the wrong direction.

So the live question is no longer whether your treaty carries an exchange-of-information clause. It is where the entity was resident on 31 December, and whether that territory was on the list in force on that date. This post names no territory and asserts no current status, deliberately: the list is fixed by ministerial order and is updated, so the only honest answer is the order in force for the year you are looking at.

How to check this yourself in the BOE API

Nobody has to take our word for any of it. The BOE serves consolidated legislation as an open API, and one request returns the whole history of an article. Ask for the block: www.boe.es/datosabiertos/api/legislacion-consolidada/id/BOE-A-2004-4527/texto/bloque/a42, sent with the header Accept: application/xml and a normal browser user agent. The header is not optional — the block endpoint serves XML only and answers a request for JSON with an HTTP 400, though the table of contents of the same act, ending in texto/indice, does return JSON.

What comes back is both the trap and the service. The response holds every historical version of the article, oldest first, each in its own version element carrying fecha_publicacion and fecha_vigencia. Take the first and you have read the 2004 text: the repealed exemption, perfectly formatted and completely wrong. Take the last, read its dates, and read the modification note that closes it, where the reform names itself — Se modifica, con efectos desde el 1 de enero de 2013, por la disposición final 5.3 de la Ley 16/2012, de 27 de diciembre. Then the metadatos endpoint of the act reports its fecha_actualizacion, so you can see whether the consolidation is current or a stale snapshot.

What to do

If a Spanish property is held through a non-resident company, settle two facts before the January window: where the entity was resident on 31 December, against the list of territories in force for that year, and whether it carries on an activity in Spain beyond holding or letting. A treaty with an exchange-of-information clause is no longer an answer to either.

The full guide

Related services

Sources